Please explain this statement using the formulas of the covered and uncovered interest rate parity?
"Uncovered interest parity states that, if covered interest parity holds, then the forward discount and hence the interest differential, should be an unbiased predictor of the ex post change in the spot rate, assuming rational expectations. The forward rate bias puzzle is given by the fact that the forward rate does not provide an unbiased forecast of the future spot rate." (Princeton Encyclopedia of the World Economy)
Be the first to answer this question.